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Stock Market Outlook for June 6, 2018

Job Openings and Labor Turnover Survey continues to suggest an economy that is unable to achieve its full potential.

 

Real Time Economic Calendar provided by Investing.com.

 

*** Stocks highlighted are for information purposes only and should not be considered as advice to purchase or to sell mentioned securities.   As always, the use of technical and fundamental analysis is encouraged in order to fine tune entry and exit points to average seasonal trends.

Stocks Entering Period of Seasonal Strength Today:

Tempur-Pedic Intl Inc. (NYSE:TPX) Seasonal Chart

Tempur-Pedic Intl Inc. (NYSE:TPX) Seasonal Chart

Tompkins Financial Corp. (AMEX:TMP) Seasonal Chart

Tompkins Financial Corp. (AMEX:TMP) Seasonal Chart

Cobiz Financial Inc. (NASD:COBZ) Seasonal Chart

Cobiz Financial Inc. (NASD:COBZ) Seasonal Chart

Caseys General Stores, Inc. (NASD:CASY) Seasonal Chart

Caseys General Stores, Inc. (NASD:CASY) Seasonal Chart

The Southern Company  (NYSE:SO) Seasonal Chart

The Southern Company (NYSE:SO) Seasonal Chart

Consolidated Edison, Inc.  (NYSE:ED) Seasonal Chart

Consolidated Edison, Inc. (NYSE:ED) Seasonal Chart

 

 

The Markets

Stocks closed fairly flat on Tuesday as gains in consumer discretionary, materials, and technology offset losses in staples, financials, and utilities.  The S&P 500 Index added a mere seven basis points, consolidating the breakout move charted in Monday‚Äôs session above short-term resistance at 2742.  This previous level of short-term resistance would now be expected to act as support, potentially resulting in a launching point to the next level of resistance around 2800.

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But while equity market performance suggests a risk-on bias, the price action of treasury prices over recent weeks suggests bond investors are not trusting the equity market rally.  The price of the intermediate treasury bond ETF (IEF) has pulled back from the $103 level of resistance charted just last week, but the decline is certainly not reminiscent of a market that is back in risk-on mode.  Support is being tested at the 50-day moving average, a level that if confirmed as support could unleash a new wave of short-covering, further unwinding a crowded trade.  A reverse head-and-shoulders pattern is becoming a possibility, which would set the stage for a move above resistance overhead.  The long-term treasury ETF (TLT) is showing a similar pattern.  Seasonally, treasury prices tend to gain between the beginning of May and the end of September, making this a critical period to look for an entry point to the defensive asset class.  There are a lot of moving parts to what is essentially a defensive bet, so best not to become overly biased for a move one way or the other until evidence confirms the path of least resistance.

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10 Year U.S. Treasury Notes Futures (TY) Seasonality

On the economic front, the report on job openings continues to suggest a labour market that is unable to meet its full potential.  The headline print for the monthly Job Openings and Labor Turnover Survey (JOLTS) indicated that openings increased to another record high in April at 6.698 million, from 6.633 million previous.  For the first time on record, the number of openings exceeds the number of individuals unemployed and actively looking for work, according to the monthly non-farm employment report.  Stripping out the seasonal adjustments, openings actually increased by 10.4%, which is less than the 13.2% increase that is average for the spring month.  The year-to-date change now sits at +37.8%, which is 7.1% above average for this time of year.  Hires, meanwhile, are trending 6.3% below average, emphasizing the skills gap that exists in getting those that are unemployed back into a position of employment.  Quits are trending 10.7% below the seasonal norm, suggesting the reluctance of employees to switch to other opportunities.  Clearly there is a structural issue preventing the economy from living up to its full potential, increasingly confirming the definition of full employment for the US economy.  Seasonally, openings tend to hit the high of the year in April amidst the ramp up in summer hiring.

Job Openings: Total Nonfarm Seasonal Chart

Monthly Job Openings: Total Nonfarm Data

Job Openings: Total Nonfarm Seasonal Chart

Quits: Total Nonfarm Seasonal Chart Hires: Total Nonfarm Seasonal Chart Layoffs and Discharges: Total Nonfarm Seasonal Chart

Sentiment on Tuesday, as gauged by the put-call ratio, ended bullish at 0.77.  This is the lowest level since the complacent price action charted in the first few weeks of the year, shifting the risk-reward equation somewhat as fund managers take off the insurance on portfolio positions.

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Seasonal charts of companies reporting earnings today:

ABM Industries Incorporated (ABM) Seasonal Chart American Superconductor Corporation (AMSC) Seasonal Chart Brown Forman Corporation (BF.B) Seasonal Chart  Comtech Telecommunications Corp. (CMTL) Seasonal Chart Five Below, Inc. (FIVE) Seasonal Chart Greif Bros. Corporation (GEF) Seasonal Chart  SeaChange International, Inc. (SEAC) Seasonal Chart Shiloh Industries, Inc. (SHLO) Seasonal Chart Signet Jewelers Limited (SIG) Seasonal Chart Streamline Health Solutions, Inc. (STRM) Seasonal Chart Thor Industries, Inc. (THO) Seasonal Chart United Natural Foods, Inc. (UNFI) Seasonal Chart Vera Bradley, Inc. (VRA) Seasonal Chart

 

 

S&P 500 Index

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TSE Composite

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